Proposition EE: Taxes On Nicotine Products, Explained

October 12, 2020

Proposition EE would create a tax on nicotine products such as electronic cigarettes, (e-cigarettes, also known as vaping devices) and increase cigarette and tobacco taxes.

A simple majority vote is required for the proposition to pass.

Initially, the money raised would go to K-12 education, rural schools, tobacco programs and a smaller portion to general state spending. Of the amount allocated for that, 27 percent must be distributed to local governments and the remainder used for general state spending. 

In 2023, the breakdown shifts so the vast bulk of the money would go to preschool programs. The next year, health care programs begin to receive a chunk of that money as well. That includes funding for Medicaid, primary care, tobacco use prevention, children’s health and a variety of other health care programs that currently get cigarette and tobacco tax revenue.

Currently, the state has no tax on vaping products. Colorado’s current tax rate on cigarettes is $0.84 per pack, which is relatively low nationally. It ranks 39th among states, according to the Campaign for Tobacco-Free Kids.

The proposal incrementally raises taxes on cigarettes and other tobacco products over the next seven years.  

The current $0.84 per pack rate would gradually rise to $2.64 by July of 2027. It also includes a minimum price requirement, so a pack of cigarettes could be sold for no less than $7, and $70 for a carton beginning in 2021. That minimum would climb again in 2024 to no less than $7.50 a pack and $75 a carton.

For vaping products, the measure would create a tax on nicotine products to match tax rates for tobacco products. That rate would start at 30 percent manufacturer’s list price in 2021 and would gradually rise to 62 percent of that price by 2027.

Other kinds of tobacco products, like cigars, snuff and chewing tobacco would also see incrementally raising taxes as well, up to that same level. Right now, they’re taxed at 40 percent of the manufacturer’s list price. Starting in 2021, that rate would increase, eventually up to 62 percent in 2027.

Public health advocates have long said raising taxes on tobacco is a good way to discourage people, especially young people, from picking up the habit, which is notoriously bad for one’s health. Proponents say not only does Colorado have one of the highest rates of youth vaping in the country. It also has one of the lowest tax rates on cigarettes and tobacco products and no tax on vaping products. Cigarettes, tobacco, and nicotine products are addictive; research shows detrimental health impacts can include cancer, as well as heart and lung disease. 

The yes side, spearheaded by the group A Brighter, Healthier Future of Colorado’s Kids, also argues Proposition EE provides needed funding for education and that providing access to free preschool gives all children the same foundation before entering kindergarten. 

Opponents say that hiking taxes and setting a minimum purchase price on cigarettes, tobacco and nicotine products imposes a financial burden on those who consume them, especially low-income users, and will hurt business owners. And they say the state should not depend on tax revenue from a specific, addictive product to pay for schools, preschool and other state services. 

Those opposed include conservatives who object to taxes in general and industry and businesses that sell tobacco products. Opponents are campaigning under the banner of Bad Deal for Colorado.

A group of discount cigarette makers, including Liggett Group LLC, Vector Tobacco Inc., and Xcaliber International Ltd., filed a lawsuit in mid-October against the state and several Democrats including the governor, attorney general and lawmakers.

The complaint alleges that in crafting the ballot measure, state officials made a "back room deal" with cigarette giant Altria, previously known as Philip Morris, to fix prices at high levels, effectively eliminating competition from discount brands.

The group in favor of the proposal, A Brighter, Healthier Future of Colorado’s Kids, called the suit a "cheap political move" designed to distract from a proposal voters support. The governor's office declined to comment on pending litigation.

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